Gemholic Vanishes After $3.5 Million ETH Withdrawal

Gemholic Vanishes After $3.5 Million ETH Withdrawal

EconomyEthereum

By Jakub Lazurek

08 Jun 2024 (11 days ago)

2 min read

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Gemholic vanishes with $3.5M in ETH, raising alarms of a potential scam and highlighting the urgent need for stronger crypto security measures.

The crypto community is in shock over a suspected $3.5 million scam by Gemholic, a project on the zkSync network. Gemholic had promised to refund investors but instead disappeared with the funds. On June 7, Gemholic's online presence vanished, including its X (formerly Twitter) handle and Telegram channel. This caused alarm among the crypto community, with many suspecting a scam. Multiple transactions on June 7 drained the project’s smart contract funds.

Social media users raised concerns, noting that Gemholic’s social media accounts were deleted. As of now, the project's X handle and Telegram channel are no longer accessible. Last year, Gemholic lost 921 ETH from a token sale due to a smart contract bug. The team had promised to refund investors once the issue was resolved.

On June 7, zkSync completed its v24 upgrade, which fixed the smart contract bug, allowing access to the locked funds. However, instead of refunding investors, the Gemholic team withdrew the 921 ETH and moved it to the Ethereum blockchain. 0xMorgosh, founder of Zkmarkets, called this a “rug pull” and accused Gemholic of deceiving investors for a year. He also pointed out that the Gemholic team had completed KYC verification with SolidProof, which has not addressed the situation publicly.

0xMorgosh criticized SolidProof, saying, “A KYC provider must either admit its incompetence or report fraudsters to authorities and make a public statement. If SolidProof ignores this issue, their platform is useless.” He also noted that Binance supposedly funded the contract creator’s address and asked the community to suggest how the exchange might help.

This incident is similar to a previous case involving ZKasino, another platform using ZK stack technology. ZKasino also failed to return users’ Ethereum, causing backlash. The project eventually reversed its fraudulent actions after Dutch authorities intervened. The Gemholic incident highlights the risks in the crypto space and the need for strong security measures and accountability. As the sector grows, trust and transparency are crucial.

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